WTO allows Brazil to retaliate in US cotton dispute

August 31, 2009

, GENEVA, Aug 31 – The World Trade Organisation on Monday authorised Brazil to impose massive retaliatory sanctions against the United States in a dispute over US cotton subsidies.

Brazil said the level of sanctions would reach 800 million dollars (557 million euros) for this year, the country\’s ambassador to the WTO, Roberto Azevedo, told journalists after the global trade watchdog released its ruling.

The WTO said Brazil could seek to "suspend concessions or other obligations" on US trade equivalent to up to 147.3 million dollars (103 million euros) for 2006 due to subsidies that dampened international cotton prices.

In addition, it said it would allow sanctions, in an annual amount to be determined according to a specific mathematical equation, for US cotton subsidies that breached trade rules. This portion was calculated at 147.4 million dollars for 2006,

The sanctions can be applied until the US drops the subsidies, diplomats said.

Brazil, which first brought the case to the trade bloc in 2002, had sought 2.5 billion dollars (2.0 billion euros) from the United States.

Azevedo explained that some of the sanctions can only be applied to goods while others can, to a limited extent, target intellectual property and services.

"We … find that it is regrettable that the United States has not yet complied with the determination of the multilateral trading system after the US subsidies have been condemned several times," he said.

"In our view this continued disregard of WTO rules by a key member of the WTO."

Azevedo called the US stance "a cause for concern" in the midst of negotiations to try to revive the Doha Round of trade liberalisation talks.

Reacting to Monday\’s ruling, Washington said it was disappointed with the overall outcome of the dispute.

But the US Trade Representative\’s office added in a statement that it was "pleased" that arbitrators had "awarded Brazil far below the amount of counter measures it asked for."

President Barack Obama\’s administration "will be actively consulting within the US government and with stakeholders on how to move forward" on the issue, said Carol Guthrie, spokeswoman for the US Trade Representative.

"At this time, we do not know when or if Brazil will move to obtain final authorization to suspend concessions or when or if Brazil would act on any such authorization," Guthrie said.

She noted that Brazil had asked for more than four billion dollars in annual countermeasures in its first request for countermeasures in the cotton dispute, before trimming the figure down to "more than" two billion dollars during arbitration proceedings.

Guthrie said the United States was "grateful" and "pleased" that the arbitrators had denied Brazil\’s requests for unlimited ability to suspend concessions on intellectual property or services.

Brazil had sought sanctions after a WTO panel upheld a Brazilian complaint that the United States had breached trade rules over its subsidies for cotton farmers.

According to Brazil, total US cotton subsidies were worth 12 billion dollars between 1999 and 2002.

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